What a busy day at Canon Inc (NYSE:CAJ)! In addition to Uchida replacing Mitarai as President, the Board of Directors approved a 3:2 stock split and raised its fiscal year-end (Dec. 31, 2006) dividend projection by 20% to 60 yen on a pre-split basis.
That projected dividend hike means its annual payout is 110 yen per share pre-split or 73.33 yen per share post-split. I assume that sometime in the near future Canon will adopt a quarterly pay-out system since the law limiting the timing of payouts to twice annually (interim and year-end) was recently revised. Companies are showing interest in introducing a quarterly payout system since it's seen as creating a more stable shareholder base.
The record date for the stock split is June 30th and effective July 1st. Following the split, Canon expects to have 1,333,316,572 billion shares outstanding compared to the 888,877,715 shares currently outstanding. Canon will also increase its authorized number of shares by 1 billion shares from the current 2 billion to total 3 billion shares.
There was no mention in the announcement of how its ADR shares will be treated. However, based on the listing ratio of 1:1 I believe the split also applies to its ADRs.
Canon's ordinary shares (Tokyo: 7751) have gained over 23% so far this year. It reached an all-time intra-day and closing high of 9,020 yen and 8,930 yen, respectively on May 2nd. Canon closed down 0.47% today at 8,500 yen but it seems the announcements of the stock split and dividend increase were made after the market closed.
Canon's ADRs are up over 30% on the year having reached all-time intra-day and closing highs of $79.65 and $79.36, respectively on May 5th. Canon traded lower yesterday at $76.63.
Canon has a 10,000 yen per share target price (pre-split) issued by Mizuho Securities and a number of analysts in Japan have 9,000+ yen per share targets. Morgan Stanley (NYSE:MS) is said to have increased its target today from 7,900 yen to 9,700 yen based on what it sees as faster cost cutting and increasing certainty that it will achieve stable growth from 2007 and beyond. A 10,000+ yen target wasn't warranted yet because of a short-term peak in momentum.
Let's not forget that Canon announced its first new president in a decade in an anticipated move already made known to the market. Tsuneji Uchida replaced Fujio Mitarai, one of the most respected corporate leaders in Japan. The change is effective May 23rd. In a statement at a press conference Uchida said, "The one thing lacking at Canon right now is the screen where we can watch high-quality images from our cameras and printers."
Note that Mitarai will stay on at Canon as Chairman & CEO as he takes over as head of the Keidanren (Japan's biggest business lobby) succeeding Toyota (NYSE:TM) Chairman Hiroshi Okuda at the end of this month.
Bloomberg quoted John Yang, an equity analyst at S&P in Tokyo who said, "Sooner or later, printers and copiers will become commodities, and Uchida will face challenges to keep up margins. He needs to keep up or exceed the 10-year legacy of Mitarai. He will have to balance out spending to keep double-digit margins." Yang is maintaining his "strong buy" rating on Canon.
The next five years is a time of expansion, driven by new technologies. That's why I was looking for an engineer to lead the company.
• Click here for a link to Canon's announcement regarding its projected dividend increase.
• Click here for the announcement regarding its stock split.
• Lastly, click here for a list of recent posts covering Canon.
CAJ 1-yr chart: